Council leaders have warned Universal Credit could halt house-building because of a surge in unpaid rent caused by the flagship benefits reform.
An investigation by BBC Panorama found that council tenants on Universal Credit owe on average £663 in rent, two-and-a-half times more than the £262 owed by those still on housing benefit.
The programme reveals that in Flintshire in North Wales, one of the first areas in the UK to receive the new system, the amount of rent owed to the council by people on Universal Credit is £1,424 in average – or six times the amount owed by those on the existing system.
The local authority says evictions in the county are up by 55% compared to the same time last year, and it has spent an extra £270,000 on advice staff to cope with the increasing numbers of people needing help.
The figures were based on Freedom of Information responses from around 130 councils that manage social housing.
This will hit the number of new council homes being built across the country at a time when we desperately need more genuinely affordable housing.”
Local Government Association
Universal Credit combines six benefits, including housing benefit, into one monthly payment.
Housing benefit now goes directly to the claimant, but the Local Government Association is calling for it to be paid directly to landlords – as it was under the old system.
Neal Cockerton, Flintshire council’s head of housing, said Universal Credit is already having a big impact on their services
“We had a rent arrears position last year of £1.6 million, it’s now £450,000 worse than it was then, and a large proportion of that is solely attributable to Universal Credit,” he said.
“Flintshire has been a pilot for Universal Credit (UC). Our other local authority colleagues are just coming into the full roll-out of UC, and some of the anecdotal conversations that we’re having is that – ‘oh dear, we’re going to be in a bit of a mess.’”
Panorama suggests the Government was aware that rent arrears would be a problem based on research it commissioned from Sheffield Hallam University.
In 2011, Professor Paul Hickman at the university discovered a growth in rent arrears and that only 8% of tenants managed to pay their rent in full.
He told Panorama: “Were we ignored? Some of what we said was listened to but I think they were so committed to the course of rolling out Universal Credit, whatever we found they were going to continue to plough ahead.”
Flintshire council tenant Anthony Smith, 63, who was laid off last November, has struggled to apply for Universal Credit online because of a lack of even basic IT skills.
Smith has been regularly sanctioned or fined for missing appointments, so has had to rely on foodbanks and sell his work tools to pay bills. He now facing eviction for owing around £4,000 in rent.
He told Panorama: “I’ve even looked for somewhere to live and I’ve found a bridge. The only thing I’m not playing ball with is I can’t use a computer. I’m left behind.”
Private landlords are also having problems, which has a knock-on effect for councils trying to find shelter for homeless families.
Flintshire council now works with 50 private landlords compared to 346 three years ago.
Steve White owns and runs 12 bedsits and has had to evict tenants because of the way Universal Credit pays rent.
He said: “They insist on paying what amounts to large sums of money to people who struggle with the responsibility of having large sums of money in their hands and it many cases it doesn’t make its way to us.
“The loss on a single tenant can go into thousands, so you times that by 10 or 20 tenants – obviously that’s something that has to change. We can’t go on the way it is, the business can’t go on the way it is.”
Richard Watts of the Local Government Association warns the problems caused by Universal Credit could jeopardise the Government’s house-building ambitions.
He said: “We need to build a lot more new genuinely affordable housing, particularly council housing – and that’s harder if councils are getting less money into their housing account because rent arrears are higher.
“This will hit the number of new council homes being built across the country at a time when we desperately need more genuinely affordable housing.”
The Department for Work and Pensions says that more than 80% of people are paid on time, and insists that there should be no issue with landlords getting their rent paid directly to them.
Alok Sharma, minister for employment, said: “After a period of time people will on average see those arrears coming down.
“But the key point here is to make sure that people get support in terms of funding, and that is why early this year we introduced a package worth one and a half billion pounds which means that anyone who’s coming onto UC who’s currently receiving housing benefit will get an extra two weeks of run-on, two weeks of extra money.”
‘Panorama: The Universal Credit Crisis’ is broadcast on BBC One at 7.30pm